Handling Impact from Covid-19 on Government Contracts

COVID-19 IMPACT

The Covid-19 virus potentially disrupts performance under government contracts in many ways, including employees unable to go to work, supply chain interruptions, travel impacts, etc. These issues can result in late performance or other potential contract defaults. We have been getting client questions on whether coronavirus cost and schedule impacts are an excusable delay, and whether Covid-19 impacts qualify as force majeure events?

IS COVID-19 A FORCE MAJEURE EVENT THAT IS AN EXCUSABLE DELAY?

Force majeure is a term in many commercial contracts that provides that certain conditions that are not the fault and beyond the control of the contractor, such as an epidemic or quarantine, provide an excusable delay. In commercial contracts, delay caused by force majeure an excusable delay and is not a default. There is no similar force majeure provision in the FAR. Recent blog articles have pointed out that FAR 52.249-8(c) and FAR 52.212-4(f) provide force majeure type protections for “epidemics” and “quarantine restrictions.” Those provisions sound similar, but operate differently. These provisions apply to terminations for default (T4D). T4D normally results in the terminated contractor being liable for excess reprocurement costs. The clauses provide that if an epidemic or quarantine causes a delay, then the contractor will not be responsible for excess costs. But there is no “excusable” delay—the delay is still a default, and the contract may still be terminated. At best, the contractor will not have to pay excess reprocurement costs. There is not a lot of case law on the topic, but the clauses are narrowly construed and applied. Contractors must prove the conditions were with no fault and beyond their control, and that the condition caused the delay. Contractors must show good faith efforts to manage impacts, so they are not considered at fault. The bottom line is the existing terms of the contract, including staffing, delivery, price, etc., all remain in place and enforceable. There is no excusable delay.

RECOMMENDED ACTIONS FOR COVID-19 CAUSED IMPACTS

The best advice is to keep close contact with the CO and COTR and let them know in advance of any adverse cost or schedule impact beyond your control. Review your contracts to ensure you provide proper and timely notification of any cost or schedule impacts. Take affirmative action to mitigate any potential impacts of an interruption in contract performance. Keep full records of cost impacts and personnel, supply or other disruptions so you can prove the impact later, if needed. If you receive a stop-work order, follow all CO directions. Keep records of all additional costs incurred to recover cost impact on a REA.

There is no general guidance to COs yet on how to handle adverse impacts, but we expect there will be direction at least at the agency level on how to deal with Covid-19 caused delays and cost impacts. There will likely also be government programs that can offer relief to contractors that incur additional operational costs due to the virus.

Additional Information

If you have questions regarding handling Covid-19 cost or schedule impacts, or would like assistance with any other federal government contract issues, contact the professionals at Williamson Law Group LLC at (301) 788-8198 for confidential and candid assistance and counsel, or e-mail Scott Williamson, managing attorney, at srw@williamsonlawgroup.com.

This Contract Compliance Update is intended to keep readers current on developments in federal government contract matters and is not intended to be legal advice. If you have any questions, please contact Williamson Law Group for legal advice regarding your particular case.